On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc.

THIRD DIVISION over 3x30 MW diesel engine power barges moored at Balayan Bay in Calaca,
Batangas. The contract, denominated as an Energy Conversion
Agreement[5] (Agreement), was for a period of five years. Article 10 reads:
FELS ENERGY, INC., G.R. No. 168557
Petitioner, 10.1 RESPONSIBILITY. NAPOCOR shall be responsible for
the payment of (a) all taxes, import duties, fees, charges and
-versus- other levies imposed by the National Government of the
Republic of the Philippines or any agency or instrumentality
thereof to which POLAR may be or become subject to or in
THE PROVINCE OF BATANGAS and relation to the performance of their obligations under this
THE OFFICE OF THE PROVINCIAL agreement (other than (i) taxes imposed or calculated on the
ASSESSOR OF BATANGAS, basis of the net income of POLAR and Personal Income Taxes
Respondents. of its employees and (ii) construction permit fees,
x----------------------------------------------------x environmental permit fees and other similar fees and charges)
NATIONAL POWER CORPORATION, G.R. No. 170628 and (b) all real estate taxes and assessments, rates and other
Petitioner, charges in respect of the Power Barges.[6]
Present:

YNARES-SANTIAGO, J., Subsequently, Polar Energy, Inc. assigned its rights under the
- versus - Chairperson, Agreement to FELS. The NPC initially opposed the assignment of rights, citing
AUSTRIA-MARTINEZ, paragraph 17.2 of Article 17 of the Agreement.
CALLEJO, SR. and
LOCAL BOARD OF ASSESSMENT CHICO-NAZARIO, JJ.
APPEALS OF BATANGAS, LAURO C. On August 7, 1995, FELS received an assessment of real property taxes
ANDAYA, in his capacity as the Assessor on the power barges from Provincial Assessor Lauro C. Andaya
of the Province of Batangas, and the Promulgated: of Batangas City. The assessed tax, which likewise covered those due for 1994,
PROVINCE OF BATANGAS represented amounted to P56,184,088.40 per annum. FELS referred the matter to NPC,
by its Provincial Assessor, February 16, 2007 reminding it of its obligation under the Agreement to pay all real estate taxes.
Respondents. It then gave NPC the full power and authority to represent it in any conference
x--------------------------------------------------------------------------------------------x regarding the real property assessment of the Provincial Assessor.

DECISION In a letter[7] dated September 7, 1995, NPC sought reconsideration of the

CALLEJO, SR., J.:
Before us are two consolidated cases docketed as G.R. No. 168557 and G.R.
No. 170628, which were filed by petitioners FELS Energy, Inc. (FELS) and National
Power Corporation (NPC), respectively. The first is a petition for review
on certiorari assailing the August 25, 2004 Decision[1] of the Court of Appeals
(CA) in CA-G.R. SP No. 67490 and its Resolution[2] dated June 20, 2005; the
second, also a petition for review on certiorari, challenges the February 9, 2005
Decision[3] and November 23, 2005 Resolution[4] of the CA in CA-G.R. SP No.
67491. Both petitions were dismissed on the ground of prescription.
The pertinent facts are as follows:
Provincial Assessors decision to assess real property taxes on the power barges.
However, the motion was denied on September 22, 1995, and the Provincial
Assessor advised NPC to pay the assessment.[8] This prompted NPC to file a
petition with the Local Board of Assessment Appeals (LBAA) for the setting aside
of the assessment and the declaration of the barges as non-taxable items; it
also prayed that should LBAA find the barges to be taxable, the Provincial
Assessor be directed to make the necessary corrections.[9]
In its Answer to the petition, the Provincial Assessor averred that the barges were
real property for purposes of taxation under Section 199(c) of Republic Act
(R.A.) No. 7160.
Before the case was decided by the LBAA, NPC filed a Manifestation,
informing the LBAA that the Department of Finance (DOF) had rendered an
opinion[10]dated May 20, 1996, where it is clearly stated that power barges are
not real property subject to real property assessment.
 On August 26, 1996, the LBAA rendered a Resolution [11] denying the
petition. The fallo reads:
WHEREFORE, the Petition is DENIED. FELS is hereby
ordered to pay the real estate tax in the amount
of P56,184,088.40, for the year 1994.
SO ORDERED.[12]
The LBAA ruled that the power plant facilities, while they may be classified as
movable or personal property, are nevertheless considered real property for
taxation purposes because they are installed at a specific location with a
character of permanency. The LBAA also pointed out that the owner of the
bargesFELS, a private corporationis the one being taxed, not NPC. A mere
agreement making NPC responsible for the payment of all real estate taxes and
assessments will not justify the exemption of FELS; such a privilege can only be
granted to NPC and cannot be extended to FELS. Finally, the LBAA also ruled
that the petition was filed out of time.
Aggrieved, FELS appealed the LBAAs ruling to the Central Board of Assessment
Appeals (CBAA).
On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of
Levy and Warrant by Distraint[13] over the power barges, seeking to collect real
property taxes amounting to P232,602,125.91 as of July 31, 1996. The notice and
warrant was officially served to FELS on November 8, 1996. It then filed a Motion
to Lift Levy dated November 14, 1996, praying that the Provincial Assessor be
further restrained by the CBAA from enforcing the disputed assessment during
the pendency of the appeal.
On November 15, 1996, the CBAA issued an Order[14] lifting the levy and distraint
on the properties of FELS in order not to preempt and render ineffectual,
nugatory and illusory any resolution or judgment which the Board would issue.
Meantime, the NPC filed a Motion for Intervention [15] dated August 7, 1998 in
the proceedings before the CBAA. This was approved by the CBAA in an
Order[16]dated September 22, 1998.
During the pendency of the case, both FELS and NPC filed several motions to
admit bond to guarantee the payment of real property taxes assessed by the
Provincial Assessor (in the event that the judgment be unfavorable to them).
The bonds were duly approved by the CBAA.
On April 6, 2000, the CBAA rendered a Decision [17] finding the power barges
exempt from real property tax. The dispositive portion reads:
WHEREFORE, the Resolution of the Local Board of Assessment
Appeals of the Province of Batangas is hereby
reversed. Respondent-appellee Provincial Assessor of
the Province of Batangas is hereby ordered to drop subject
property under ARP/Tax Declaration No. 018-00958 from the List
of Taxable Properties in the Assessment Roll. The Provincial
Treasurer of Batangas is hereby directed to act accordingly.
SO ORDERED.[18]
Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges
belong to NPC; since they are actually, directly and exclusively used by it, the
power barges are covered by the exemptions under Section 234(c) of R.A. No.
7160.[19] As to the other jurisdictional issue, the CBAA ruled that prescription did
not preclude the NPC from pursuing its claim for tax exemption in accordance
with Section 206 of R.A. No. 7160. The Provincial Assessor filed a motion for
reconsideration, which was opposed by FELS and NPC.
In a complete volte face, the CBAA issued a Resolution[20] on July 31,
2001 reversing its earlier decision. The fallo of the resolution reads:
WHEREFORE, premises considered, it is the resolution of
this Board that:
(a) The decision of the Board dated 6 April 2000 is
hereby reversed.
(b) The petition of FELS, as well as the intervention of
NPC, is dismissed.
(c) The resolution of the Local Board of Assessment
Appeals of Batangas is hereby affirmed,
(d) The real property tax assessment on FELS by the
Provincial Assessor of Batangas is likewise hereby
affirmed.
SO ORDERED.[21]
FELS and NPC filed separate motions for reconsideration, which were
timely opposed by the Provincial Assessor. The CBAA denied the said motions
in a Resolution[22] dated October 19, 2001.
Dissatisfied, FELS filed a petition for review before the CA docketed as
CA-G.R. SP No. 67490. Meanwhile, NPC filed a separate petition, docketed as
CA-G.R. SP No. 67491.
On January 17, 2002, NPC filed a Manifestation/Motion for
Consolidation in CA-G.R. SP No. 67490 praying for the consolidation of its
petition with CA-G.R. SP No. 67491. In a Resolution[23] dated February 12, 2002,
the appellate court directed NPC to re-file its motion for consolidation with CA-
G.R. SP No. 67491, since it is the ponente of the latter petition who should resolve
the request for reconsideration.
NPC failed to comply with the aforesaid resolution. On August 25, 2004,
the Twelfth Division of the appellate court rendered judgment in CA-G.R. SP No.
67490 denying the petition on the ground of prescription. The decretal portion
of the decision reads:
WHEREFORE, the petition for review is DENIED for lack of
merit and the assailed Resolutions dated July 31,
2001 and October 19, 2001 of the Central Board of Assessment
Appeals are AFFIRMED.
SO ORDERED.[24]
On September 20, 2004, FELS timely filed a motion for reconsideration seeking
the reversal of the appellate courts decision in CA-G.R. SP No. 67490.
Thereafter, NPC filed a petition for review dated October 19, 2004 before this
Court, docketed as G.R. No. 165113, assailing the appellate courts decision in
CA-G.R. SP No. 67490. The petition was, however, denied in this Courts
Resolution[25] of November 8, 2004, for NPCs failure to sufficiently show that the
CA committed any reversible error in the challenged decision. NPC filed a
motion for reconsideration, which the Court denied with finality in a
Resolution[26] dated January 19, 2005.
Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491.
It held that the right to question the assessment of the Provincial Assessor had
already prescribed upon the failure of FELS to appeal the disputed assessment
to the LBAA within the period prescribed by law. Since FELS had lost the right to
question the assessment, the right of the Provincial Government to collect the
tax was already absolute.
NPC filed a motion for reconsideration dated March 8, 2005, seeking
reconsideration of the February 5, 2005 ruling of the CA in CA-G.R. SP No. 67491.
The motion was denied in a Resolution[27] dated November 23, 2005.
The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been
earlier denied for lack of merit in a Resolution[28] dated June 20, 2005.
On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557
before this Court, raising the following issues:
A.
Whether power barges, which are floating and movable, are
personal properties and therefore, not subject to real property
tax.
B.
Assuming that the subject power barges are real properties,
whether they are exempt from real estate tax under Section
234 of the Local Government Code (LGC).
C.
Assuming arguendo that the subject power barges are subject
to real estate tax, whether or not it should be NPC which should
be made to pay the same under the law.
D.
Assuming arguendo that the subject power barges are real
properties, whether or not the same is subject to depreciation
just like any other personal properties.
E.
Whether the right of the petitioner to question the patently null
and void real property tax assessment on the petitioners
personal properties is imprescriptible.[29]
On January 13, 2006, NPC filed its own petition for review before this
Court (G.R. No. 170628), indicating the following errors committed by the CA:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE
APPEAL TO THE LBAA WAS FILED OUT OF TIME.
II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT
THE POWER BARGES ARE NOT SUBJECT TO REAL PROPERTY
TAXES.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT
THE ASSESSMENT ON THE POWER BARGES WAS NOT MADE IN
ACCORDANCE WITH LAW.[30]
Considering that the factual antecedents of both cases are similar, the Court
ordered the consolidation of the two cases in a Resolution[31] dated March 8,
2006.

In an earlier Resolution dated February 1, 2006, the Court had required the
parties to submit their respective Memoranda within 30 days from notice. Almost
a year passed but the parties had not submitted their respective memoranda.
Considering that taxesthe lifeblood of our economyare involved in the present
controversy, the Court was prompted to dispense with the said pleadings, with
the end view of advancing the interests of justice and avoiding further delay.
In both petitions, FELS and NPC maintain that the appeal before the LBAA was
not time-barred. FELS argues that when NPC moved to have the assessment
reconsidered on September 7, 1995, the running of the period to file an appeal
with the LBAA was tolled. For its part, NPC posits that the 60-day period for
appealing to the LBAA should be reckoned from its receipt of the denial of its
motion for reconsideration.
Petitioners contentions are bereft of merit.
Section 226 of R.A. No. 7160, otherwise known as the Local Government
Code of 1991, provides:
SECTION 226. Local Board of Assessment Appeals. Any
owner or person having legal interest in the property who is not
satisfied with the action of the provincial, city or municipal
assessor in the assessment of his property may, within sixty (60)
days from the date of receipt of the written notice of
assessment, appeal to the Board of Assessment Appeals of the
province or city by filing a petition under oath in the form
prescribed for the purpose, together with copies of the tax
declarations and such affidavits or documents submitted in
support of the appeal.
We note that the notice of assessment which the Provincial Assessor sent to FELS
on August 7, 1995, contained the following statement:
If you are not satisfied with this assessment, you may, within
sixty (60) days from the date of receipt hereof, appeal to the
Board of Assessment Appeals of the province by filing a
petition under oath on the form prescribed for the purpose,
together with copies of ARP/Tax Declaration and such
affidavits or documents submitted in support of the appeal.[32]
Instead of appealing to the Board of Assessment Appeals (as stated in
the notice), NPC opted to file a motion for reconsideration of the Provincial
Assessors decision, a remedy not sanctioned by law.
The remedy of appeal to the LBAA is available from an adverse ruling
or action of the provincial, city or municipal assessor in the assessment of the
property. It follows then that the determination made by the respondent
Provincial Assessor with regard to the taxability of the subject real properties falls
within its power to assess properties for taxation purposes subject to appeal
before the LBAA.[33]
We fully agree with the rationalization of the CA in both CA-G.R. SP No.
67490 and CA-G.R. SP No. 67491. The two divisions of the appellate court cited
the case of Callanta v. Office of the Ombudsman,[34] where we ruled that
under Section 226 of R.A. No 7160,[35] the last action of the local assessor on a
particular assessment shall be the notice of assessment; it is this last action which
gives the owner of the property the right to appeal to the LBAA. The procedure
likewise does not permit the property owner the remedy of filing a motion for
reconsideration before the local assessor. The pertinent holding of the Court
in Callanta is as follows:
x x x [T]he same Code is equally clear that the
aggrieved owners should have brought their appeals before
the LBAA. Unfortunately, despite the advice to this effect
contained in their respective notices of assessment, the owners
chose to bring their requests for a review/readjustment before
the city assessor, a remedy not sanctioned by the law. To allow
this procedure would indeed invite corruption in the system of
appraisal and assessment. It conveniently courts a graft-prone
situation where values of real property may be initially set
unreasonably high, and then subsequently reduced upon the
request of a property owner. In the latter instance, allusions of
a possible covert, illicit trade-off cannot be avoided, and in
fact can conveniently take place. Such occasion for mischief
must be prevented and excised from our system.[36]
For its part, the appellate court declared in CA-G.R. SP No. 67491:
x x x. The Court announces: Henceforth, whenever the
local assessor sends a notice to the owner or lawful possessor
of real property of its revised assessed value, the former shall
no longer have any jurisdiction to entertain any request for a
review or readjustment. The appropriate forum where the
aggrieved party may bring his appeal is the LBAA as provided
by law. It follows ineluctably that the 60-day period for making
the appeal to the LBAA runs without interruption. This is what
We held in SP 67490 and reaffirm today in SP 67491.[37]
To reiterate, if the taxpayer fails to appeal in due course, the right of
the local government to collect the taxes due with respect to the taxpayers
property becomes absolute upon the expiration of the period to appeal. [38] It
also bears stressing that the taxpayers failure to question the assessment in the
LBAA renders the assessment of the local assessor final, executory and
demandable, thus, precluding the taxpayer from questioning the correctness
of the assessment, or from invoking any defense that would reopen the question
of its liability on the merits.[39]
In fine, the LBAA acted correctly when it dismissed the petitioners
appeal for having been filed out of time; the CBAA and the appellate court
were likewise correct in affirming the dismissal. Elementary is the rule that the
perfection of an appeal within the period therefor is both mandatory and
jurisdictional, and failure in this regard renders the decision final and
executory.[40]
In the Comment filed by the Provincial Assessor, it is asserted that the
instant petition is barred by res judicata; that the final and executory judgment
in G.R. No. 165113 (where there was a final determination on the issue of
prescription), effectively precludes the claims herein; and that the filing of the
instant petition after an adverse judgment in G.R. No. 165113 constitutes forum
shopping.
FELS maintains that the argument of the Provincial Assessor is
completely misplaced since it was not a party to the erroneous petition which
the NPC filed in G.R. No. 165113. It avers that it did not participate in the
aforesaid proceeding, and the Supreme Court never acquired jurisdiction over
it. As to the issue of forum shopping, petitioner claims that no forum shopping
could have been committed since the elements of litis pendentia or res
judicata are not present.
We do not agree.
Res judicata pervades every organized system of jurisprudence and is
founded upon two grounds embodied in various maxims of common law,
namely: (1) public policy and necessity, which makes it to the interest of the
State that there should be an end to litigation republicae ut sit litium; and (2)
the hardship on the individual of being vexed twice for the same cause nemo
debet bis vexari et eadem causa. A conflicting doctrine would subject the
public peace and quiet to the will and dereliction of individuals and prefer the
regalement of the litigious disposition on the part of suitors to the preservation
of the public tranquility and happiness.[41] As we ruled in Heirs of Trinidad De
Leon Vda. de Roxas v. Court of Appeals:[42]
x x x An existing final judgment or
decree rendered upon the merits, without
fraud or collusion, by a court of competent
jurisdiction acting upon a matter within its
authority is conclusive on the rights of the
parties and their privies. This ruling holds in all
other actions or suits, in the same or any other
judicial tribunal of concurrent jurisdiction,
touching on the points or matters in issue in the
first suit.
xxx
Courts will simply refuse to reopen what has been
decided. They will not allow the same parties or their privies to
litigate anew a question once it has been considered and
decided with finality. Litigations must end and terminate
sometime and somewhere. The effective and efficient
administration of justice requires that once a judgment has
become final, the prevailing party should not be deprived of
the fruits of the verdict by subsequent suits on the same issues
filed by the same parties.
This is in accordance with the doctrine of res
judicata which has the following elements: (1) the former
judgment must be final; (2) the court which rendered it had
jurisdiction over the subject matter and the parties; (3) the
judgment must be on the merits; and (4) there must be
between the first and the second actions, identity of parties,
subject matter and causes of action. The application of the
doctrine of res judicata does not require absolute identity of
parties but merely substantial identity of parties. There is
substantial identity of parties when there is community of
interest or privity of interest between a party in the first and a
party in the second case even if the first case did not implead
the latter.[43]
To recall, FELS gave NPC the full power and authority to represent it in
any proceeding regarding real property assessment. Therefore, when petitioner
NPC filed its petition for review docketed as G.R. No. 165113, it did so not only
on its behalf but also on behalf of FELS. Moreover, the assailed decision in the
earlier petition for review filed in this Court was the decision of the appellate
court in CA-G.R. SP No. 67490, in which FELS was the petitioner. Thus, the
decision in G.R. No. 165116 is binding on petitioner FELS under the principle of
privity of interest. In fine, FELS and NPC are substantially identical parties as to
warrant the application of res judicata. FELSs argument that it is not bound by
the erroneous petition filed by NPC is thus unavailing.
On the issue of forum shopping, we rule for the Provincial Assessor.
Forum shopping exists when, as a result of an adverse judgment in one forum,
a party seeks another and possibly favorable judgment in another forum other
than by appeal or special civil action or certiorari. There is also forum shopping
when a party institutes two or more actions or proceedings grounded on the
same cause, on the gamble that one or the other court would make a
favorable disposition.[44]
Petitioner FELS alleges that there is no forum shopping since the
elements of res judicata are not present in the cases at bar; however, as
already discussed, res judicata may be properly applied herein. Petitioners
engaged in forum shopping when they filed G.R. Nos. 168557 and 170628 after
the petition for review in G.R. No. 165116. Indeed, petitioners went from one
court to another trying to get a favorable decision from one of the tribunals
which allowed them to pursue their cases.
It must be stressed that an important factor in determining the
existence of forum shopping is the vexation caused to the courts and the
parties-litigants by the filing of similar cases to claim substantially the same
reliefs.[45] The rationale against forum shopping is that a party should not be
allowed to pursue simultaneous remedies in two different fora. Filing multiple
petitions or complaints constitutes abuse of court processes, which tends to
degrade the administration of justice, wreaks havoc upon orderly judicial
procedure, and adds to the congestion of the heavily burdened dockets of the
courts.[46]
Thus, there is forum shopping when there exist: (a) identity of parties, or
at least such parties as represent the same interests in both actions, (b) identity
of rights asserted and relief prayed for, the relief being founded on the same
facts, and (c) the identity of the two preceding particulars is such that any
judgment rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other.[47]
Having found that the elements of res judicata and forum shopping are
present in the consolidated cases, a discussion of the other issues is no longer
necessary. Nevertheless, for the peace and contentment of petitioners, we shall
shed light on the merits of the case.
As found by the appellate court, the CBAA and LBAA power barges
are real property and are thus subject to real property tax. This is also the
inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure
to sufficiently show any reversible error. Tax assessments by tax examiners are
presumed correct and made in good faith, with the taxpayer having the
burden of proving otherwise.[48] Besides, factual findings of administrative
bodies, which have acquired expertise in their field, are generally binding and
conclusive upon the Court; we will not assume to interfere with the sensible
exercise of the judgment of men especially trained in appraising property.
Where the judicial mind is left in doubt, it is a sound policy to leave the
assessment undisturbed.[49] We find no reason to depart from this rule in this
case.
In Consolidated Edison Company of New York, Inc., et al. v. The City
of New York, et al.,[50] a power company brought an action to review property
tax assessment. On the citys motion to dismiss, the Supreme Court of New
York held that the barges on which were mounted gas turbine power plants
designated to generate electrical power, the fuel oil barges which supplied fuel
oil to the power plant barges, and the accessory equipment mounted on the
barges were subject to real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that [d]ocks
and structures which, though floating, are intended by their nature and object
to remain at a fixed place on a river, lake, or coast are considered immovable
property. Thus, power barges are categorized as immovable property by
destination, being in the nature of machinery and other implements intended
by the owner for an industry or work which may be carried on in a building or
on a piece of land and which tend directly to meet the needs of said industry
or work.[51]
Petitioners maintain nevertheless that the power barges are exempt
from real estate tax under Section 234 (c) of R.A. No. 7160 because they are
actually, directly and exclusively used by petitioner NPC, a government- owned
and controlled corporation engaged in the supply, generation, and
transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the
taxable properties is petitioner FELS, which in fine, is the entity being taxed by
the local government. As stipulated under Section 2.11, Article 2 of the
Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the
Power Barges and all the fixtures, fittings, machinery and
equipment on the Site used in connection with the Power
Barges which have been supplied by it at its own cost. POLAR
shall operate, manage and maintain the Power Barges for the
purpose of converting Fuel of NAPOCOR into electricity.[52]
It follows then that FELS cannot escape liability from the payment of
realty taxes by invoking its exemption in Section 234 (c) of R.A. No. 7160, which
reads:
SECTION 234. Exemptions from Real Property Tax. The
following are exempted from payment of the real property tax:
xxx
(c) All machineries and equipment that are actually,
directly and exclusively used by local water districts
 and government-owned or controlled corporations
engaged in the supply and distribution of water
and/or generation and transmission of electric
power; x x x
Indeed, the law states that the machinery must be actually, directly
and exclusively used by the government owned or controlled corporation;
nevertheless, petitioner FELS still cannot find solace in this provision because
Section 5.5, Article 5 of the Agreement provides:
OPERATION. POLAR undertakes that until the end of
the Lease Period, subject to the supply of the necessary Fuel
pursuant to Article 6 and to the other provisions hereof, it will
operate the Power Barges to convert such Fuel into electricity
in accordance with Part A of Article 7.[53]
achieve their fullest development as self-reliant communities and make them
effective partners in the attainment of national goals.[59]
In conclusion, we reiterate that the power to tax is the most potent
instrument to raise the needed revenues to finance and support myriad
activities of the local government units for the delivery of basic services essential
to the promotion of the general welfare and the enhancement of peace,
progress, and prosperity of the people.[60]
WHEREFORE, the Petitions are DENIED and the assailed Decisions and
Resolutions AFFIRMED.
SO ORDERED.

It is a basic rule that obligations arising from a contract have the force
of law between the parties. Not being contrary to law, morals, good customs,
public order or public policy, the parties to the contract are bound by its terms
and conditions.[54]

Time and again, the Supreme Court has stated that taxation is the rule
and exemption is the exception.[55] The law does not look with favor on tax
exemptions and the entity that would seek to be thus privileged must justify it
by words too plain to be mistaken and too categorical to be
misinterpreted.[56] Thus, applying the rule of strict construction of laws granting
tax exemptions, and the rule that doubts should be resolved in favor of
provincial corporations, we hold that FELS is considered a taxable entity.

The mere undertaking of petitioner NPC under Section 10.1 of the

Agreement, that it shall be responsible for the payment of all real estate taxes
and assessments, does not justify the exemption. The privilege granted to
petitioner NPC cannot be extended to FELS. The covenant is between FELS and
NPC and does not bind a third person not privy thereto, in this case,
the Province of Batangas.

It must be pointed out that the protracted and circuitous litigation has
seriously resulted in the local governments deprivation of revenues. The power
to tax is an incident of sovereignty and is unlimited in its magnitude,
acknowledging in its very nature no perimeter so that security against its abuse
is to be found only in the responsibility of the legislature which imposes the tax
on the constituency who are to pay for it.[57] The right of local government units
to collect taxes due must always be upheld to avoid severe tax erosion. This
consideration is consistent with the State policy to guarantee the autonomy of
local governments[58] and the objective of the Local Government Code that
they enjoy genuine and meaningful local autonomy to empower them to
G.R. No. L-17870 September 29, 1962
MINDANAO BUS COMPANY, petitioner,
vs.
THE CITY ASSESSOR & TREASURER and the BOARD OF TAX APPEALS of Cagayan
de Oro City,respondents.
Binamira, Barria and Irabagon for petitioner.
Vicente E. Sabellina for respondents.
LABRADOR, J.:
This is a petition for the review of the decision of the Court of Tax Appeals in
C.T.A. Case No. 710 holding that the petitioner Mindanao Bus Company is
liable to the payment of the realty tax on its maintenance and repair
equipment hereunder referred to.
Respondent City Assessor of Cagayan de Oro City assessed at P4,400
petitioner's above-mentioned equipment. Petitioner appealed the assessment
to the respondent Board of Tax Appeals on the ground that the same are not
realty. The Board of Tax Appeals of the City sustained the city assessor, so
petitioner herein filed with the Court of Tax Appeals a petition for the review of
the assessment.
In the Court of Tax Appeals the parties submitted the following stipulation of
facts:
Petitioner and respondents, thru their respective counsels agreed to
the following stipulation of facts:
1. That petitioner is a public utility solely engaged in transporting
passengers and cargoes by motor trucks, over its authorized lines in
the Island of Mindanao, collecting rates approved by the Public
Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro
City. It maintains Branch Offices and/or stations at Iligan City, Lanao;
Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon
Province;
3. That the machineries sought to be assessed by the respondent as
real properties are the following:
(a) Hobart Electric Welder Machine, appearing in the
attached photograph, marked Annex "A";
(b) Storm Boring Machine, appearing in the attached
photograph, marked Annex "B";
(c) Lathe machine with motor, appearing in the attached
photograph, marked Annex "C";
(d) Black and Decker Grinder, appearing in the attached
photograph, marked Annex "D";
(e) PEMCO Hydraulic Press, appearing in the attached
photograph, marked Annex "E";
(f) Battery charger (Tungar charge machine) appearing in
the attached photograph, marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing in the attached
photograph, marked Annex "G".
4. That these machineries are sitting on cement or wooden platforms
as may be seen in the attached photographs which form part of this
agreed stipulation of facts;
5. That petitioner is the owner of the land where it maintains and
operates a garage for its TPU motor trucks; a repair shop; blacksmith
and carpentry shops, and with these machineries which are placed
therein, its TPU trucks are made; body constructed; and same are
repaired in a condition to be serviceable in the TPU land
transportation business it operates;
6. That these machineries have never been or were never used as
industrial equipments to produce finished products for sale, nor to
repair machineries, parts and the like offered to the general public
indiscriminately for business or commercial purposes for which
petitioner has never engaged in, to date.1awphl.nt
The Court of Tax Appeals having sustained the respondent city assessor's
ruling, and having denied a motion for reconsideration, petitioner brought the
case to this Court assigning the following errors:
1. The Honorable Court of Tax Appeals erred in upholding
respondents' contention that the questioned assessments are valid;
 and that said tools, equipments or machineries are immovable
taxable real properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article 415
of the New Civil Code, and holding that pursuant thereto the
movable equipments are taxable realties, by reason of their being
intended or destined for use in an industry.
3. The Court of Tax Appeals erred in denying petitioner's contention
that the respondent City Assessor's power to assess and levy real
estate taxes on machineries is further restricted by section 31,
paragraph (c) of Republic Act No. 521; and
4. The Tax Court erred in denying petitioner's motion for
reconsideration.
Respondents contend that said equipments, tho movable, are immobilized by
destination, in accordance with paragraph 5 of Article 415 of the New Civil
Code which provides:
Art. 415. The following are immovable properties:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by
the owner of the tenement for an industry or works which may be
carried on in a building or on a piece of land, and which tend directly
to meet the needs of the said industry or works. (Emphasis ours.)
Note that the stipulation expressly states that the equipment are placed on
wooden or cement platforms. They can be moved around and about in
petitioner's repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil.
663, the Supreme Court said:
Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the
character of real property to "machinery, liquid containers,
instruments or implements intended by the owner of any building or
land for use in connection with any industry or trade being carried on
therein and which are expressly adapted to meet the requirements of
such trade or industry."
If the installation of the machinery and equipment in question in the
central of the Mabalacat Sugar Co., Inc., in lieu of the other of less
capacity existing therein, for its sugar and industry, converted them
into real property by reason of their purpose, it cannot be said that
their incorporation therewith was not permanent in character
because, as essential and principle elements of a sugar central,
without them the sugar central would be unable to function or carry
on the industrial purpose for which it was established. Inasmuch as the
central is permanent in character, the necessary machinery and
equipment installed for carrying on the sugar industry for which it has
been established must necessarily be permanent. (Emphasis ours.)
So that movable equipments to be immobilized in contemplation of the law
must first be "essential and principal elements" of an industry or works without
which such industry or works would be "unable to function or carry on the
industrial purpose for which it was established." We may here distinguish,
therefore, those movable which become immobilized by destination because
they are essential and principal elements in the industry for those which may
not be so considered immobilized because they are merely incidental, not
essential and principal. Thus, cash registers, typewriters, etc., usually found and
used in hotels, restaurants, theaters, etc. are merely incidentals and are not
and should not be considered immobilized by destination, for these businesses
can continue or carry on their functions without these equity comments.
Airline companies use forklifts, jeep-wagons, pressure pumps, IBM machines,
etc. which are incidentals, not essentials, and thus retain their movable nature.
On the other hand, machineries of breweries used in the manufacture of
liquor and soft drinks, though movable in nature, are immobilized because
they are essential to said industries; but the delivery trucks and adding
machines which they usually own and use and are found within their industrial
compounds are merely incidental and retain their movable nature.
Similarly, the tools and equipments in question in this instant case are, by their
nature, not essential and principle municipal elements of petitioner's business
of transporting passengers and cargoes by motor trucks. They are merely
incidentals acquired as movables and used only for expediency to
facilitate and/or improve its service. Even without such tools and equipments,
its business may be carried on, as petitioner has carried on, without such
equipments, before the war. The transportation business could be carried on
without the repair or service shop if its rolling equipment is repaired or serviced
in another shop belonging to another.
The law that governs the determination of the question at issue is as follows:
Art. 415. The following are immovable property:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by
the owner of the tenement for an industry or works which may be
carried on in a building or on a piece of land, and which tend directly
to meet the needs of the said industry or works; (Civil Code of the
Phil.)
Aside from the element of essentiality the above-quoted provision also
requires that the industry or works be carried on in a building or on a piece of
land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the "machinery,
liquid containers, and instruments or implements" are found in a building
constructed on the land. A sawmill would also be installed in a building on
land more or less permanently, and the sawing is conducted in the land or
building.

But in the case at bar the equipments in question are destined only to repair
or service the transportation business, which is not carried on in a building or
permanently on a piece of land, as demanded by the law. Said equipments
may not, therefore, be deemed real property.

Resuming what we have set forth above, we hold that the equipments in
question are not absolutely essential to the petitioner's transportation business,
and petitioner's business is not carried on in a building, tenement or on a
specified land, so said equipment may not be considered real estate within
the meaning of Article 415 (c) of the Civil Code.

WHEREFORE, the decision subject of the petition for review is hereby set aside
and the equipment in question declared not subject to assessment as real
estate for the purposes of the real estate tax. Without costs.

So ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Reyes, J.B.L., Paredes, Dizon and
Makalintal, JJ., concur.
Regala, Concepcion and Barrera JJ., took no part.
Mindanao Bus Co. v. City
Assessor Digest
G.R. No. L-17870 29 September 1962
Facts: Petitioner is a public utility company engaged in the transport of
passengers and cargo by motor vehicles in Mindanao with main offices in
Cagayan de Oro (CDO). Petitioner likewise owned a land where it
maintains a garage, a repair shop and blacksmith or carpentry shops.
The machineries are placed thereon in wooden and cement platforms.
The City Assessor of CDO then assessed a P4,400 realty tax on said
machineries and repair equipment. Petitioner appealed to the Board of
Tax Appeals but it sustained the City Assessor's decision, while the Court
of Tax Appeals (CTA) sustained the same.

Note: This is merely a case digest to aid in remembering the important

points of a case. It is still advisable for any student of law to read the full
text of assigned cases.

Issue: Whether or not the machineries and equipments are

considered immobilized and thus subject to a realty tax

Held: The Supreme Court decided otherwise and held that said
machineries and equipments are not subject to the assessment of real
estate tax.

Said equipments are not considered immobilized as they are merely

incidental, not esential and principal to the business of the petitioner. The
transportation business could be carried on without repair or service
shops of its rolling equipment as they can be repaired or services in
another shop belonging to another
FELS ENERGY VS PROVINCE OF
BATANGAS
FACTS
NPC entered into a lease contract with Polar Energy, Inc. (POLAR) over diesel
engine power barges moored at Balayan Bay in Calaca, Batangas. The
contract contained a provision that POLAR may be or become subject to real
estate taxes and assessments, rates and other charges in respect of the power
barges.Subsequently, POLAR assigned its rights under the Agreement to Fels
Energy, Inc. (FELS). Later, FELS received an assessment of real property
taxes on the power barges from Provincial Assessor, that the owner or person
having legal interest may appeal the matter within 60 days from receipt to the
Board of Assessment Appeals of the province. FELS referred the matter to
NPC, which sought reconsideration of the Provincial Assessors decision to
assess real property taxes on the power barges. However, the motion was
denied and the Provincial Assessor advised NPC to pay the assessment. After
sixty (60) days from receipt of assessment from, the NPC filed a petition with
the Local Board of Assessment Appeals (LBAA) for the setting aside of the
assessment and the declaration of the barges as non-taxable items; it also
prayed that should LBAA find the barges to be taxable, the Provincial Assessor
be directed to make the necessary corrections.
province or city by filing a petition under oath in the form prescribed for the
purpose, together with copies of the tax declarations and such affidavits or
documents submitted in support of the appeal. Instead of appealing to the
Board of Assessment Appeals (as stated in the notice), NPC opted to file a
motion for reconsideration of the Provincial Assessors decision, a remedy not
sanctioned by law.
[Citing] the case of Callanta v. Office of the Ombudsman, where [the Supreme
Court] ruled that under Section 226 of R.A. No 7160, the last action of the local
assessor on a particular assessment shall be the notice of assessment; it is
this last action which gives the owner of the property the right to appeal to the
LBAA. The procedure likewise does not permit the property owner the remedy
of filing a motion for reconsideration before the local assessor. It follows
ineluctably that the 60-day period for making the appeal to the LBAA runs
without interruption.

ISSUE
WhetherNPCs appeal to LBAA may prosper considering that the timely filing
of MR with the Provincial Assessor tolled the running of reglementay period.

HELD
NO.
Section 226 of R.A. No. 7160, otherwise known as the Local Government
Code of 1991, provides:SECTION 226. Local Board of Assessment Appeals.
Any owner or person having legal interest in the property who is not satisfied
with the action of the provincial, city or municipal assessor in the assessment
of his property may, within sixty (60) days from the date of receipt of the written
notice of assessment, appeal to the Board of Assessment Appeals of the
Chavez v. Pea and Amari
Fact:
In 1973, the Comissioner on Public Highways entered into a contract to
reclaim areas of Manila Bay with the Construction and Development
Corportion of the Philippines (CDCP).
PEA (Public Estates Authority) was created by President Marcos under
P.D. 1084, tasked with developing and leasing reclaimed lands. These
lands were transferred to the care of PEA under P.D. 1085 as part of the
Manila Cavite Road and Reclamation Project (MCRRP). CDCP and PEA
entered into an agreement that all future projects under the MCRRP
would be funded and owned by PEA.
By 1988, President Aquino issued Special Patent No. 3517 transferring
lands to PEA. It was followed by the transfer of three Titles (7309, 7311
and 7312) by the Register of Deeds of Paranaque to PEA covering the
three reclaimed islands known as the FREEDOM ISLANDS.
Subsquently, PEA entered into a joint venture agreement (JVA) with
AMARI, a Thai-Philippine corporation to develop the Freedom Islands.
Along with another 250 hectares, PEA and AMARI entered the JVA
which would later transfer said lands to AMARI. This caused a stir
especially when Sen. Maceda assailed the agreement, claiming that such
lands were part of public domain (famously known as the mother of all
scams).
Peitioner Frank J. Chavez filed case as a taxpayer praying for mandamus,
a writ of preliminary injunction and a TRO against the sale of reclaimed
lands by PEA to AMARI and from implementing the JVA. Following these
events, under President Estradas admin, PEA and AMARI entered into
an Amended JVA and Mr. Chaves claim that the contract is null and void.
Issue:
w/n: the transfer to AMARI lands reclaimed or to be reclaimed as part of
the stipulations in the (Amended) JVA between AMARI and PEA violate
Sec. 3 Art. XII of the 1987 Constitution
w/n: the court is the proper forum for raising the issue of whether the
amended joint venture agreement is grossly disadvantageous to the
government.
Held:
On the issue of Amended JVA as violating the constitution:
1. The 157.84 hectares of reclaimed lands comprising the Freedom
Islands, now covered by certificates of title in the name of PEA, are
alienable lands of the public domain. PEA may lease these lands to
private corporations but may not sell or transfer ownership of these lands
to private corporations. PEA may only sell these lands to Philippine
citizens, subject to the ownership limitations in the 1987 Constitution and
existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain
inalienable natural resources of the public domain until classified as
alienable or disposable lands open to disposition and declared no longer
needed for public service. The government can make such classification
and declaration only after PEA has reclaimed these submerged areas.
Only then can these lands qualify as agricultural lands of the public
domain, which are the only natural resources the government can
alienate. In their present state, the 592.15 hectares of submerged areas
are inalienable and outside the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private
corporation, ownership of 77.34 hectares110 of the Freedom Islands, such
transfer is void for being contrary to Section 3, Article XII of the 1987
Constitution which prohibits private corporations from acquiring any
kind of alienable land of the public domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of
290.156 hectares111 of still submerged areas of Manila Bay, such transfer
is void for being contrary to Section 2, Article XII of the 1987 Constitution
which prohibits the alienation of natural resources other than agricultural
lands of the public domain.
PEA may reclaim these submerged areas. Thereafter, the government can
classify the reclaimed lands as alienable or disposable, and further
declare them no longer needed for public service. Still, the transfer of
such reclaimed alienable lands of the public domain to AMARI will be
void in view of Section 3, Article XII of the 1987Constitution which
prohibits private corporations from acquiring any kind of alienable land
of the public domain.